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Japanese investors bought Australian sovereign bonds in June as the benchmark yield surged to its highest level in 14 months, ending a record stretch of sales.
Money managers in Japan made net purchases of 54.3 billion yen ($561 million) after selling the South Pacific nation’s government debt in each of the previous 10 months, the Tokyo-based Ministry of Finance said today. Overall, they offloaded Aussie dollar-denominated securities worth 247 billion yen, the smallest sales in three months. U.S. Treasury sales moderated to 1.1 trillion yen from 3 trillion yen in May.
While Japan’s fund managers have sold U.S. dollar and Aussie-denominated securities in each of the first six months of the year, there are signs that trend may be changing. Weekly data, also released today, showed investors made net purchases of offshore debt for a fifth week in the period ended Aug. 2.
“One of the reasons they may might focus on Australiangovernment bonds over others would be for their extra liquidity,” said Damien McColough, head of fixed-income research atWestpac Banking Corp. (WBC) in Sydney. “At the end of the day, the Japanese are still very risk-averse. If they can get a good high yield for the benchmark bond that satisfies Mrs. Watanabe, they’ll do it.”
Individual Japanese investors are sometimes referred to as “Mrs. Watanabe,” a reference to housewifes who control family budgets.
Australia’s 10-year bond yield fell two basis points, or 0.02 percentage point, to 3.67 percent today and touched 4.04 percent on June 24, the most since April 5, 2012.
Kokusai Bearish
Kokusai Asset Management Co., which runs Asia’s biggest bond fund, said last month it halved its Australian holdings this year as a slowing economy makes the nation’s assets less attractive than those of North America and Europe. Masataka Horii, who runs the Global Sovereign Open Fund said July 18 that he cut Aussie investments to 10 percent from as much as 20 percent late last year.
Investors have sold 516 billion yen of Australian government debt and 1.9 trillion of securities denominated in the nation’s currency this year. They offloaded 9.2 trillion yen of U.S. Treasuries and 9.5 trillion yen of dollar bonds, the data show.
Japan bought a net 689.9 billion yen of foreign debt in the five days ended Aug. 2, separate data today showed.
Australia’s sovereign bonds have risen 0.3 percent in August and 0.7 percent this year, Bank of America Merrill Lynch data show. U.S. Treasuries are little changed this month and down 2.7 percent since Dec. 31.
The Aussie dollar rose 0.5 percent to 87.09 yen as of 12:43 p.m. in Sydney, paring its decline this year to 3.5 percent.
Bloomberg
